1081Insurance companies treated as large companies

(2)For the purposes of Chapters 2 to 5 the company is to be treated as if it were not such an enterprise in the period.

(3)Accordingly the company is to be treated as a large company for the purposes of Chapter 5.

1082R&D expenditure of group companies

(1)This section applies if—

(a)a company (“A”) incurs expenditure on making a payment to another company (“B”) in respect of activities contracted out by A to B,

(b)the activities would, if carried out by A, be research and development of A (taken together with A’s other activities), and

(c)A and B are members of the same group at the time the payment is made.

(2)If the activities are undertaken by B itself, they are to be treated for the purposes of Chapters 3 and 5 (so far as it would not otherwise be the case) as research and development undertaken by B itself.

(3)If B makes a payment to a third party (“C”), any of the activities—

(a)contracted out by B to C, and

(b)undertaken by C itself,

are to be treated for the purposes of Chapters 3 and 5 (so far as it would not otherwise be the case) as research and development contracted out by B to C.

(4)For the purposes of this section A and B are members of the same group if they are members of the same group of companies for the purposes of Chapter 4 of Part 10 of ICTA (group relief).

1083Refunds of expenditure treated as income chargeable to tax

(1)This section applies if a company receives a payment (“the refund”) refunding the whole or any part of expenditure—

(a)to which subsection (2) applies, and

(b)in respect of which the company obtains relief under Chapter 3, 4 or 5.

(i)qualifying expenditure on contracted out research and development under section 1078, or

(ii)qualifying expenditure on contributions to independent research and development under section 1079.

(3)30% of the refund is to be treated as income of the company chargeable to tax under Chapter 2 of Part 3 for the accounting period in which the refund is made.

(4)But subsection (3) does not apply if, because of section 1080(4) (gross roll-up business), the relief obtained in respect of the expenditure concerned is an additional deduction in calculating for corporation tax purposes the profits of gross roll-up business of the company.

(5)In that case 30% of the refund is to be treated as income which is—

(a)referable to the gross roll-up business, and

(b)chargeable, for the accounting period in which the refund is made, under the charge to corporation tax on income.

1084Artificially inflated claims for relief or tax credit

(1)To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be disregarded for the purposes mentioned in subsection (2).

(2)Those purposes are—

(a)determining for an accounting period relief to which a company is entitled under Chapters 2 to 5, and

(b)determining for an accounting period R&D tax credits to which a company is entitled under Chapter 2.

(3)Arrangements are entered into wholly or mainly for a “disqualifying purpose” if their main object, or one of their main objects, is to enable a company to obtain—

(a)relief under Chapters 2 to 5 to which it would not otherwise be entitled,

(b)relief under Chapters 2 to 5 of a greater amount than that to which it would otherwise be entitled,

(c)an R&D tax credit under Chapter 2 to which it would not otherwise be entitled, or

(d)an R&D tax credit under Chapter 2 of a greater amount than that to which it would otherwise be entitled.

(4)In this section “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.

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